Debt panel fallout may infect 2012

With congressional leaders so far unable to rescue the struggling supercommittee, Washington is now in store for a wild winter where deficit politics will be injected into the middle of a tense 2012 campaign season.

If the supercommittee fails to reach $1.2 trillion — a near certainty at this point — it will spark a messy year-end rush to prevent key programs from expiring, and intensifying efforts by disparate groups of lawmakers to push competing deficit-cutting proposals.

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On the legislative docket: extending unemployment insurance, fixing the Alternative Minimum Tax, reforming the reimbursement formula for physicians who treat Medicare patients and maintaining a payroll tax break first enacted in 2009. All of these expensive provisions are slated to expire at year’s end and had been under consideration by the supercommittee under its fast-track procedures.

But with a deal looking less likely after a fruitless day of negotiations Friday, Congress will have to confront these matters individually in the middle of a packed year-end legislative blitz and as funding for the entire government runs out Dec. 16.

“We very well could have a very difficult time,” Sen. Richard Lugar (R-Ind.), a 34-year veteran of the Senate, said Friday.

And 2012 will be only be more difficult, as Republicans — who were unable to win Democratic support for lowering marginal tax rates for all income groups to the supercommittee package — will continue their uphill climb to try to prevent the Bush-era tax cuts from expiring at the end of the year.

Plus, there’s a growing push by defense hawks to blunt the so-called “sequester” that would slice $600 billion out of Pentagon programs starting in 2013, and $600 billion in other areas of the government, if the supercommittee cannot win approval of $1.2 trillion worth of cuts.

On top of that — and perhaps most nettlesome for leadership in both chambers — failure will embolden other lawmakers who have been itching to have their say on the deficit, renewing long-simmering legislative battles that have so far failed to reverse a debt that’s more than $15 trillion.

“I’m just very hopeful that our colleagues now understand the serious consequences of doing nothing or not getting to $4 trillion,” said Sen. Saxby Chambliss (R-Ga.), who added that failure by the committee could prompt a renewed effort by his group known as the Gang of Six that has struggled for much of the year to produce its own deficit reduction package.

This could have been avoided if the six Democrats and six Republicans on the 12-member supercommittee could reach a bipartisan deal, but they have failed to find the right mix of new taxes and cuts to entitlement programs that are politically palatable to both parties.

The supercommittee, which has been meeting since September, considered wrapping most of these expiring provisions into a grand deficit proposal. Republicans had initially proposed a $2.2 trillion debt reduction plan; Democrats a $3.1 trillion plan.

Then the goal dropped down to the minimum amount called for by the law - $1.2 trillion, but that fell apart over the issue of taxes. Democrats opposed GOP efforts to lower the tax rates for the upper bracket to 28 percent, lower than the 39.6 percent if the Bush tax rates expire in 2013.

On Friday, there was an effort by congressional leaders to cut a deal for a much smaller package that would limit the amount of automatic cuts that would affect defense and other programs.

But those, too, fell apart Friday afternoon.

Republicans made an offer for a small-bore, $640 billion deficit reduction package in the mid-afternoon. The package, which included mostly mandatory spending cuts and fees, was rejected by Democrats as part of high-level staff discussions between Speaker John Boehner (R-Ohio) and Senate Majority Leader Harry Reid (D-Nev.). Democrats wanted a larger revenue number, even though the GOP agreed to close a loophole for corporate jets — long a talking point for the left.